LAPSE OF AN OFFER

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LAPSE OF AN OFFER

Lapse of an offer refers to revocation of an offer as the time passes. Circumstances in which an offer lapses and becomes invalid are listed below:

LAPSE BY REVOCATION: UNDER SECTION 7 (1)

If the offeror revokes the offer before its acceptance by the offeree, the offer stands lapsed. According to rules, an offer can be revoked, at any time before it is accepted by communicating a notice of revocation to the offeree.

For example, at an auction sale, the highest bidder can revoke his offer to buy before the fall of the hammer.

BY LAPSE OF STIPULATED OR REASONABLE TIME: UNDER SECTION 6(2)

The offeree must accept the offer within the time prescribed in the offer and if no time is prescribed, it must be accepted within a reasonable time. Thus, the offer lapses if it is not accepted within the time prescribed in the offer or within a reasonable time. What is a reasonable time depends upon the circumstances in each case.

CASE:  RAMSGATE VICTORIA HOTEL CO. V. MONTEFIORE

M offered to buy shares of a company on June 8. The Company informed him about the allotment on November 23. M refused to accept the shares. It was held that M’s offer to buy shares had lapsed because it was not accepted within a reasonable time.

BY FAILURE TO FULFILL CONDITION PRECEDENT TO ACCEPTANCE: UNDER SECTION 6(3)

When there is a condition in the offer which must be fulfilled before the acceptance of the offer, the offer lapses if the acceptance is given without fulfilling that condition.

For example, A offered to sell his scooter to B for Rs. 10,000 subject to the condition that B should pay Rs. 2,000 before a certain date. B accepted the offer but did not pay the money. In this case the acceptance has no validity and the offer stands terminated.

BY DEATH OR INSANITY OF THE OFFEROR OR THE OFFEREE BEFORE ACCEPTANCE: UNDER SECTION 6 (4)

An offer lapses by the death or insanity of on offeror if the fact of his death or insanity comes to the knowledge of the acceptor before he makes his acceptance. But if the offer is accepted in ignorance of the death or insanity of the offerer, there will be a valid contract. This means that the death or insanity of the offerer does not terminate the offer automatically. The offer lapses only when this fact comes to the knowledge of the offeree before acceptance. Our law is different in this respect from English law where the death of the offerer terminates the offer even if acceptance is made in ignorance of the death. There is no provision in the Act about the effect of the death of an offeree before acceptance. But it is an established rule that the offer comes to an end on the death of the offeree, because an offer can be accepted only by the offeree and not by any other person. It cannot be accepted by the legal heirs of the offeree.

BY REJECTION OF OFFER BY THE OFFEREE:

An offer lapses as soon as it is rejected by the offeree. The rejection may be express i.e., by words spoken or written, or implied. Implied rejection is one:

  • where either the offeree makes a counter offer, or
  • where the offeree gives a conditional acceptance.

Once an offer is rejected, it cannot be revived subsequently. An offer is said to be rejected, if the offeree expressly rejects it or accepts it subject to certain conditions.

EXAMPLE: A, offered to sell his motorcar to B for Rs 85,000. B said that he accepted the offer if he was appointed as General Manager of s factory. B’s acceptance is a ‘conditional acceptance’ which amounts to rejection of A’s offer and there is no contract.

IF IT IS NOT ACCEPTED IN THE PRESCRIBED OR USUAL MODE: UNDER SECTION 7

Sometimes, the offeror prescribes the mode of acceptance. In such a situation the offer must, be accepted in that very manner and if it is not accepted in the prescribed mode the offer stands lapsed. For example, A offers to sell his house to B and writes to B ‘send your acceptance by telegram’. Now if the acceptance is sent by some other mode, then A may not be bound by the acceptance.

BY COUNTER OFFER BY THE OFFEREE:

Counter offer means making a fresh offer instead of accepting the original offer. A counter offer amounts to the rejection of the original offer. Hence, as soon as the counter offer is made, the original offer stand lapsed. If the person who makes a counter offer changes his mind and wishes to accept the original offer, he cannot do so.

For example, A offered to sell his bicycle to B for Rs. 200. B said that he would buy it for Rs. 170. Here B’s offer to buy for Rs. 170 is counter offer and terminates the original offer of A. If later on B wants to buy the cycle for Rs. 200, it will bc a case of a fresh offer and not an acceptance of the original offer.

BY SUBSEQUENT ILLEGALITY OR DESTRUCTION OF SUBJECT-MATTER:

An offer lapses if it becomes illegal before it is accepted. For example, A of Delhi offered to supply 100 bags of rice to B at Lucknow on a certain date. But, before this offer is accepted by B, the Government has issued an order prohibiting the inter-state movement of foodgrains. AutomaticalIy the offer made by A comes to an end. Similarly, if the subject-matter of the offer is destroyed before acceptance, the offer lapses.

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